RBA to share thoughts on rates

The reasoning behind the Reserve Bank of Australia’s decision to keep interest rates on hold this month will become a little clearer tomorrow, when the central bank releases the minutes of its August meeting.

RBA governor
Glenn Stevens
may also provide some guidance on the ­decision to keep the benchmark rate ­unchanged for three straight months when he delivers a speech later in the day at the University of Western Aust­ralia in Perth.Stevens’ last public speaking engagement was more than three weeks ago on July 20

“Any question-and-answer session, or any comment he makes on credit growth, bank funding costs or house prices will be closely watched for any hints on just how important these ­metrics are to the RBA’s decision-making process," UBS chief economist Scott Haslem said.

RBA deputy governor
Ric Battellino
is also scheduled to give a speech, in Queensland on Friday.

“His past speeches suggest that he is one of the more hawkish members on the RBA board," Mr Haslem said.

The statement that the RBA releases when it announces its policy decisions are normally less than 500 words, so the more expansive minutes released a fortnight later are picked over by economists to get a clearer picture of the bank’s thinking.Most economists don’t expect the RBA to start raising rates again until later this year or early next year.

Statistics due to be published this week will provide further clues about the impact of the mining boom on wage costs and potential ­inflationary pressures.

The Australian Bureau of Statistics will release its wage cost index for the second quarter. Economists expect a 0.9 per cent increase from the previous three months.

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“This would repeat the first-quarter result and shows that the period of slower wages growth during the global financial crisis is over," Citigroup chief economist Paul Brennan said. The index is forecast to gain 3.1 per cent from a year earlier.

The RBA was able to keep its policy rate on hold this month largely because underlying inflation slowed in the June quarter to 2.7 per cent, within its target band of 2 per cent to 3 per cent.

More information about the potential impact of labour market shortages on wage costs may be gleaned from August’s skilled ­vacancy index, to be issued on Wednesday. The index rose 0.3 per cent in July from the previous month, with the trades category rising 1 per cent. In annual terms, the skilled vacancy index is 22.7 per cent higher than in July 2009.